Dispatch #174: A Spot Bitcoin ETF Special

Jan 13 4 min read

Dispatch

In this patch of your weekly Dispatch:

SEC’s stamp of approval ✔️
Bitcoin’s first day on Wall St 🏛️
A social media hack 💔

The Big Idea

A New Era Ushers In

The approval of a spot Bitcoin ETF has marked a momentous step in the maturation of the crypto asset class.

Some have compared it to the transformative impact of the first-ever spot gold ETF in 2004, when the gold market witnessed a remarkable surge from $1-2 trillion to $16 trillion within a few years post-approval.

Industry leaders chipped in on the long-awaited development, among whom Nexo Co-founder and Antoni duly noting the magnitude of this "new chapter."

This historic week prompted Dispatch editors to read between the lines this week and pay fitting tribute to a cornerstone event for the entire digital assets sector. In this Dispatch Special, dedicated to the spot Bitcoin ETFs, we look at the key aspects of and first reactions to this week’s developments.

10 Years in the Making

The SEC's recent approval of 11 spot Bitcoin ETFs marked a significant milestone. The journey began in 2013 with the Winklevoss twins' initial application facing rejections in 2017 and 2018. Grayscale's 2020 transformation paved the way for the first U.S. publicly traded Bitcoin fund. In 2021, the SEC approved the ProShares Bitcoin Trust, a futures-based ETF. Despite rejections in 2022, the SEC's recent decision has further cemented Bitcoin’s reputation as a fully-fledged AND innovative asset class.

Not Technically a Pioneer

In an elephant-in-the-room type of situation, for all their anticipated grandeur, US-based spot Bitcoin ETFs were not pioneering.

In Europe, the Netherlands listed a spot BTC ETF (BCOIN), launched in July 2023. While US-based companies filed applications years ago, the EU proved more flexible in adopting financial innovation with a relatively swift approval period from 2021 to 2023.
Prior to that, the title was claimed by the Canadian Purpose spot Bitcoin ETF introduced in February 2021.
Turning to Asia, Hong Kong seeks to expedite local approvals and solidify its position as a global virtual asset hub, with 10 financial firms preparing applications. Legislative Council Member Johnny Ng stressed the need for enhanced education on virtual assets, signalling a push towards local exchange-traded products.

There’s no Timing These Markets

With the Fear and Greed index signaling firm greed and open interest in futures and options markets climbing closer to levels last seen in previous bull markets, all eyes were glued to the charts on the day – 10 January, the SEC-proclaimed first deadline. The question remained the same: Do we buy or do we sell the news?

For the fairest of predictions, we flipped a silver Nexo coin for the classic 50/50 heads-or-tails approach. Not that we’d publish the outcome, yet a feeling of sabotage was left as SEC’s Twitter account got "compromised", for a fake approval to be granted. Bitcoin jumped violently up and right back down as clarification on the incident arrived from Gary Gensler himself.

The long-awaited approval arrived timely on the next day with BTC surpassing $47,000 intraday for the first time in almost two years. 🔥

Bitcoin ETFs Have Taken Off

Spot bitcoin ETFs marked their debut in the U.S. with a stellar first day of trading, amassing over $4.6 billion in volume. Grayscale Bitcoin Trust (GBTC) took center stage, accounting for more than half of the trading volume, yet analysts speculate this dominance might be short-lived. Blackrock's iShares Bitcoin Trust and Fidelity's Wise Origin Bitcoin fund emerged as strong contenders, the three contributing 87% of the total trading volume. The battle for dominance is anticipated to unfold between Blackrock, Fidelity, and Invesco, paving the way for an exciting chapter in the world of spot bitcoin ETFs.

Step In, Ethereum

Bitcoin's initial surge came from the younger demographic, yet now, attention turns to potential adoption by elder generations through the traditional channels that they are accustomed to. Early surveys show 88% of advisors are interested in purchasing Bitcoin, post-spot ETF approval.

SEC's approval opens the door for Ether ETFs with BlackRock, VanEck, Invesco, and 21Shares filing applications, indicating a positive trend for expanding cryptocurrency investment options, as Nexo’s Antoni Trenchev told CNBC.

The Week’s Most Interesting Data Story

The ETF Effect

Those underestimating the effect that spot Bitcoin ETF introduction had on markets need to look no further than the right side of the chart below. That increase in exchange volume dominance is coinciding fully with last year’s six-month-long spot Bitcoin approval saga.